Could the DOD’s launch vehicle block buy plan get blocked?

By Jeff Foust on 2011 October 19 at 7:45 am ET

As part of its efforts to reform its procurement of space systems, the Air Force has looked at a number of strategies, including the concept of “block buys”, where a relatively large number of items—satellites, rockets, etc.—are purchased at a time, allowing for lower per-unit prices. A plan to do a bulk buy of EELV-class launch vehicles, though, is facing new scrutiny after the release of a Government Accountability Office (GAO) report this week.

Under what the GAO calls the “leading proposal” for a launch vehicle acquisition strategy, government agencies would agree to acquire eight EELV boosters cores a year for five years. This would, DOD officials argue, provide some stability for the the industrial base and help contain costs over the current approach of effectively buying one launch at a time. A block buy today of EELV-class booster cores, though, would effectively be a sole-source award to United Launch Alliance (ULA), which manufactures the Atlas and Delta rockets. A long-term award could effectively lock out emerging competitors like SpaceX, even as the Air Force, NRO, and NASA are developing criteria for certifying new vehicles, as those agencies announced just last week.

“We do have a bit of a challenge with the Air Force,” SpaceX CEO Elon Musk said last month at the National Press Club, citing the proposed block buy. One of the rationales for the block buy, he said, was preservation of the nation’s industrial base, “although for some reason, oddly enough, we’re not included in the industrial base.”

The GAO report concluded that while the DOD was gathering data to support its decision on an EELV procurement strategy, it still had “critical gaps” in its knowledge, including limited data on the health of the industrial base. It also noted that the planned buy might be too large, creating an oversupply of booster cores that would have to be stored, incurring additional costs if those cores are stored for a year or more.

The report also addressed the potential for competition, with the DOD sounding conflicted about whether to encourage competition. “Some DOD officials acknowledge competition offers potential benefits, but others believe that competing for EELV launches will endanger the program’s stability and threaten its long history of launch successes,” the report stated. The Program Executive Office (PEO) for Space Launch in the Air force, Roger Correll, told the GAO that “he believes competition will benefit the program, and intends to work with ULA and potential competitors to incentivize cost efficiencies while maintaining mission success.”

Because of the potential for competition and other uncertainties, the GAO report recommended, among other items, that the DOD “reassess” the length of the planned block buy in order to incorporate the additional data it’s collecting about its procurement strategy. That recommendation was the only one of seven that the DOD did not fully endorse in its response, included in the GAO report. “The decision on specific contractual quantity and period of commitment will be balanced among price, operational requirements, budget realities and the potential for new entrant competition,” Deputy Secretary of Defense Ronald Jost wrote in a letter to the GAO.

SpaceX played up that the GAO report’s conclusions in a press release Tuesday, saying it “raises troubling questions for taxpayers” about the proposed block buy. On the other hand, the Lexington Institute’s Loren Thompson, no fan of SpaceX, argued that ULA’s rockets might be a better deal even at higher prices, given their track record of successful launches versus SpaceX’s limited history. “Once risk is factored into the comparisons, it’s hard to see how federal officials could justify placing a billion-dollar spy satellite, or for that matter astronauts, on Falcon 9 or any other SpaceX launch vehicle until there was much more evidence of their reliability,” he wrote.

Musk, in his National Press Club speech, played up SpaceX as an underdog to the much larger aerospace primes, who, he said, devote far more resources on lobbying than his company. “If this decision is made as a function of lobbying power,” he said of a proposed block buy, “we are screwed.”

37 comments to Could the DOD’s launch vehicle block buy plan get blocked?

“although for some reason, oddly enough, we’re not included in the industrial base.”

SpaceX is not a credible supplier of launch services. The DOD has far less to lose if SpaceX goes under than if Lockmart or Boeing did. To suggest otherwise is absurd. For its high costs ULA has an excellent mission success rate.

The block buy from ULA is good for America. It will immediately lower the cost per launch in the coming years. Musk is fishing for yet another taxpayer gratuity. Large as it is, the DOD market is of limited size and growth potential and will support a limited number of suppliers. Most DOD contractors have learned this painful lesson in the last 30 years of massive industry consolidation. Nerdspace doesn’t change this.

“raises troubling questions for taxpayers”

More troubling to us taxpayers is SpaceX’s lack of performance on its current NASA contract. It is almost 2012 and they are 4 years late in delivering supplies to the ISS, a wretched record. To coin a phrase, “tick-tock tick-tock…”

So let the block buy be for 3 years and 4 cores a year. That will give SpaceX time to get it’s FH up if it can.

Also, amightywind, you should know that you aren’t really coming across as an effective advocate. You sort of sound like an old timer arguing that diesel locomotives are evil and it is only sensible to stay with steam. You’re losing this thing.

SpaceX is in the classic Catch22 situation. They need to launch to prove their reliability, but customers like the DoD want to see reliability before giving them something to launch.
Because of the SpaceX price point and the upcoming scheduled launches for NASA and other commercial satellites, it would be prudent to the DoD to keep a couple of launches open for SpaceX in the 2013/14 time frame. That would still not preclude a block buy of EELV launches to lower costs of those vehicles.

– Anticipate when a second qualified supplier could be awarded orders, and don’t commit to a supplier for those payloads until order lead-times trigger a commitment.

The worst situation to avoid is overbuying, which is not only bad for secondary suppliers that want to break into the market, but it’s also bad for ULA since it could lead to boom & bust manufacturing demand.

The DOD needs to be sure it’s not being penny wise, but pound foolish.

You sort of sound like an old timer arguing that diesel locomotives are evil and it is only sensible to stay with steam.

Really? Have you looked closely at the F9 propulsion package? The Marlin engine is an anachronism. It has the lowest Isp and thrust to weight ratio of almost any first stage engine in use today and many were designed 30 years ago. It takes 9 of them to get off the ground! I am critical of the F9 because I don’t think it is a strong product. It is a below average product that gets a lot of hype.

Loren Thompson’s argument is pure straw man. Of course the DoD or NRO aren’t going to start using SpaceX immediately on billion dollar spacecraft. (Nor NASA for people, which is what commercial crew is for.) That’s the whole point of the new cerifying criteria released last week. The point is to start competing the smaller and/or more risk tolerant launches that would have otherwise gone on an Atlas 401 or Delta II or Delta IV Medium.

As for your comments, amightywind, a block buy isn’t going to lower costs as compared to today. It is meant to lock in prices so that they don’t continue to rise (as they have been doing the past few years). I’d also like to know how wanting to be paid to provide launch services counts as a “taxpayer gratuity”? That is different from paying ULA for launch services how? Finally, SpaceX has experienced delays in developing an enitre launch system and reusable capsule from scratch (which shouldn’t surprise anyone) but since they aren’t paid until they produce results, can’t complain too much.

The Marlin engine is an anachronism. It has the lowest Isp and thrust to weight ratio of almost any first stage engine in use today and many were designed 30 years ago.

Thrust to weight and Isp are not the end-all be-all of rocket engine design. There are little things like cost (which includes manufacturability/labor/materials, testing requirements, design effort time, operational requirements, etc) and reliability. Perhaps SpaceX was willing to trade off some performance to achieve large gains in cost and reliability?

“SpaceX is in the classic Catch22 situation. They need to launch to prove their reliability, but customers like the DoD want to see reliability before giving them something to launch.”

If SpaceX were solely dependent on the DoD then a Catch-22 situation would be true, but they’re not.

SpaceX has a backlog of 12 NASA CRS missions for the ISS and 24 other launches for commercial customers. By the end of next year the Air Force could have six Falcon 9 launches to consider for their reliability analysis, so all they have to do is wait a relatively short amount of time (15 months) to see what the trend looks like for Falcon 9.

They will also have launch data on OSC’s Taurus II, so this is more a matter of timing than anything else – the Air Force doesn’t have to commit funds to test out these new rockets, they just need to hold off on over-committing to a buy of Delta IV and Atlas V’s.

Two EELV contractors were originally selected to ensure competition. When Boeing was found to be using insider data for their bids (from a former Lockheed employee) some of their payloads were taken away. This forced Boeing into the merger. Once merged, ULA had a monopoly in the government market and found it more profitable to let costs rise to increase profits. But as a result they became noncompetitive in the commercial market; count the number of real commercial launches from US soil in the past five years.
Now along comes SpaceX and wants to compete. Of course this would bring prices down for the US government. It would put SpaceX in an even stronger position going after commercial payloads. It would also give ULA an incentive to control costs and maybe go after the commercial market again. There are at least some ULA employees who would not see this as a bad thing.

“Which is just what I said in the second paragraph. Please read before commenting.”

True, but you also said that SpaceX was in a Catch-22 situation with the Air Force (which it isn’t), and that was the main part I was addressing. Glad we agree on something though – maybe it’s a trend?

“SpaceX is not a competitor. It’s limited line of LEO LVs carry little’weight’ for 21st century space operations and planning.”

Their “limited” offering is 0-117,000 lbs to LEO on one rocket. If that’s limiting then ULA is S.O.L., and the SLS is the only rocket that is going to save us. Luckily, just like usual, you appear to be living in la-la land.

Here in the real world SpaceX has attracted numerous orders from many companies because it has good designs, real hardware, great management & employees, and prices that make customer business cases look better. Haven’t you looked at their launch manifest recently?

There is a reason SpaceX has $3.5B in launch orders, and until you understand why they do you won’t understand how they can be a competitor to ULA. Not that it matters that you understand, since, you know, no one is coming to you for guidance on this subject…

“When is F9H suppose to be ready? And when will it have completed few flights to prove the concept? Not by 2016.”

The first Falcon Heavy (not Falcon 9 Heavy) is planned to be delivered to the Vandenberg launch site in late 2012, with it’s first flight in 2013 or early 2014.

Since the Falcon Heavy shares the same 1st and 2nd stage sections as the Falcon 9, all the Falcon 9 flights provide flight heritage for the Falcon Heavy. This is the same reason why Delta IV Heavy only needed one test flight, since it’s just three Delta IV’s strapped together. Though there will be Falcon Heavy specific concerns, they can address those far quicker than a single-purpose rocket like the SLS can.

2016 is very doable if they have successful tests, and SpaceX would really only be limited by manufacturing capacity to do flights in 2015 or even 2014, something they have said they are already planning for.

STOP CALLING IT THE “FALCON 9 HEAVY(F9H)”!!! It’s JUST Falcon Heavy(FH). No 9. No number of any kind. If there WAS to be a number it would be 27, because it has 27 Merlin engines, which is why Falcon 1 and 9 are called those numbers (they have 1 and 9 Merlin engines respectively). But the powers that be at SpaceX didn’t like the sound of Falcon 27, so they just decided to call it Falcon Heavy.

=yawn= And you drive a Tucker- or more appropriately, a Yugo. SpaceX is not a player with the big boys for planning 21st century space operations. Even Windy sees that: “More troubling to us taxpayers is SpaceX’s lack of performance on its current NASA contract. It is almost 2012 and they are 4 years late in delivering supplies to the ISS, a wretched record. To coin a phrase, “tick-tock tick-tock…” Take it to the bank, Windy- and mint it as well. It’s coin of the relm to NewSpacer and Musketeers. Tick-tock, tick-tock.

So did the Yugo for a time. And the Ford Pinto. Golf is a consistently low rated televised program yet networks keep broadcasting it because it maintains a steadt ad revenue base reaching a high end audience. Bread and butter broadcasting. SpaceX has a niche, but is irrelevant to planning major space projects of scale for 21st century space exploration. It’s not a big player. Space X has not launched, orbited and returned anybody safely. Nobody. flown nobody. .

No, in point of fact,
SpaceX has yet to fly a vehicle capable of 4540 kg to GTO.
SBIRS is heavier that 4500 kg and GPS IIF is heavier.
X-37B isn’t flying again.
Most of the DOD upcoming launches are not 401’s and 4,2.

“SpaceX is not a player with the big boys for planning 21st century space operations. ”

NASA, under both Griffin and Bolden, apparently didn’t get your memo.

SpaceX was chosen by the Griffin administration to provide “21st century space operations” cargo services for the ISS.

And more recently SpaceX was awarded one of four contracts to develop a crew transportation system (CCDev-2). SpaceX even announced today that it had successfully completed it’s 4th milestone on the program, which was the preliminary design review of their LAS. They are far ahead of everyone else.

CRS and CCDev are the biggest “21st century space operations” programs going today, so as Cernan would say, you don’t know what you don’t know.

Griffin? Oh yeah, there’s a fella with a record of incredibly poor decisions you want to use to bolster your arguments. And as Cernan did say about commercial space- they don’t know what they don’t know yet. Bur it’s noce you’re proud of SpaceX finishing a new set of drawings. give the kiddies a gold star. Tick-tock, tick-tock.

That doesn’t contradict anything I said. However, the mass is for the F9 Block 2, which is the only single stick version they are selling right now and would be the applicable vehicle over the next five years.

“Bread and butter broadcasting. SpaceX has a niche, but is irrelevant to planning major space projects of scale for 21st century space exploration. It’s not a big player. Space X has not launched, orbited and returned anybody safely. Nobody. flown nobody.”

This is a thread about DoD satellite launches. How does exploration and launching people have anything to do with this topic?

“What Spacex is selling is irrelevant, they have not proven the capability.”

Years ago you could have had justifiable reservations about what SpaceX was offering, but so far they have shown with real launches that they can do what they advertise. True they haven’t demonstrated their GEO delivery capability, but is it so hard to connect the dots with what they have done so far?

Using your logic, Congress shouldn’t authorize budgets for any SLS-specific payloads until the SLS has proven it’s reliability. I may think the SLS is over-priced and unneeded, but I have no doubt that it can meet the specs advertised. Are you advocating a zero-risk approach to allocating payloads to launch vehicles?

“Anyways, most DOD programs can’t use it”

Once Falcon Heavy comes online that excuse will go away, especially since the maximum price for the Falcon Heavy is far below the minimum price for a ULA alternative. Because of this ULA probably has less than 5 years to get their pricing lowered, since in 5 years SpaceX will have demonstrated enough launch history to merit being evaluated for significant DoD business.

“Also, DOD has stated that they only do vertical payload integration.”

If that was really a gating issue then it could be addressed either through the payload manufacturer or SpaceX adding vertical payload integration. I’m sure SpaceX is aware of the issue, so we’ll have to see how the DoD & SpaceX decide to address it.

“If that was really a gating issue then it could be addressed either through the payload manufacturer or SpaceX adding vertical payload integration. I’m sure SpaceX is aware of the issue, so we’ll have to see how the DoD & SpaceX decide to address it.”

It is, Spacex is scrambling. It changes their whole conops, for both coasts.

It is amusing to see the statist monopoly advocates try every objection, whether based in fact grounded in experience, or not…like a politician throwing mud in a political contest, to see what sticks. But then, this *is* Space Politics, so I suppose political speeches rather than analysis should be expected.

The equipment used by SpaceX is optimized *not* for payload performance uber alles, but for lower recurring operating costs consonant with safety and, later, reusability. It is notable that the people who speak of the lack of proven performance of Falcon 9 are the same people who ignore just that when speaking of SLS. They are the same people who cannot remember which new spacecraft has bulges on its sides for escape systems, and which do not.

They are the same people who conveniently forget that what is slowing *all* alternatives to a vehicle sourced and designed in Huntsville is *not* the companies. It is NASA’s demand that 5 times as many heads as designed a vehicle, many with local Alabama paychecks, be involved in grinding away through procedures for ammunition to be made into human-crewed vehicles. It is the demand, above all else for control sufficiently politicized that a Senator or Congressman need not fear he cannot point the flow of money to his “good friends”.

You might even begin to believe in a sort of “NASA/Congressional Complex”, that we were warned of in 1961.

So are you saying they were unaware of this situation when they made plans for their Vandenberg launch site? Seems like it wouldn’t be too hard to add a rolling assembly structure (ala the Soyuz one at Kourou) over the rocket. It would change their operations some, but for military payloads it may just be the cost of doing business.

SpaceX has a niche, but is irrelevant to planning major space projects of scale for 21st century space exploration. It’s not a big player. Space X has not launched, orbited and returned anybody safely. Nobody. flown nobody. .

I have heard this kind of argument before in the 70s … Japanese cars will never be successful in the USA because they don’t have a lot of experience and they really aren’t that smart. Really? And how has that turned out? SpaceX has hired the best and brightest and it is just a matter of time before they surpass ULA. Everyone knows there is bloat over in ULA and the US taxpayer is the one getting screwed. Based on the fact that we have a massive debt crisis in the US, it’s gonna happen. Nobody is saying to use a vehicle that is faulty just give them a chance to prove themselves, that is all.